Bao Fan: rainmaker’s disappearance bodes badly for whole sector

The disappearance of star Chinese banker Bao Fan merits a thought experiment. Imagine a top western peer such as Jamie Dimon of JPMorgan or BNP Paribas’s Jean-Laurent Bonnafé vanishing without explanation or an immediate police investigation.

That highlights the damage done to business confidence in China by arbitrary detention — the presumed fate of the billionaire founder of investment bank China Renaissance.

Bao had been preparing to move some of his fortune to Singapore, as some peers have done. Investors should ask whether the government is preparing a broader crackdown on banks and bankers. History shows that detentions often presage sectoral stock price declines.

China Renaissance had outstanding loans of just Rmb2.3bn ($336mn) and Rmb5bn of credit facilities at the end of June. The bank’s small size means risks for counter parties are limited.

Contagion is more likely to be via political channels. When Alibaba founder Jack Ma disappeared in 2020, it foreshadowed a crackdown on the tech sector. Ren Zhiqiang, former chair of property developer Huayuan Real Estate Group, went missing the same year, marking pressure on property groups.

In 2015, the disappearances of Guo Guangchang, chair of highly geared conglomerate Fosun, and Yim Fung, boss of brokerage Guotai Junan, sent similar signals. Beijing aimed to stem a foreign investment spree and suspect practices in financial services.

Shares of China Renaissance have fallen 28 per cent in five days. That is in line with previous boss disappearances. Such declines typically have momentum. Shares of both Guotai Junan Securities and Fosun have dropped about 50 per cent in total.

Investment bankers would be a fresh target for officialdom, however. China Renaissance is best known for high-profile tech sector deals, including listings for ride-hailing company Didi in New York and ecommerce group JD.com in Hong Kong.

Bao’s disappearance may therefore reflect continuing official hostility to tech, as much as animosity towards finance and offshore asset transfers.